FORM 10-K CONTANGO OIL & GAS COMPANY

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CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS F-6 Year Ended June 30, 2009 2008 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Income (loss) from continuing operations……………………………………………………………… $ 55,861,202 $ 83,221,204 $ (1,077,712) Plus income from discontinued operations, net of income taxes……………………………………… - 173,685,065 (1,616,839) Net income (loss)……………………………………………………………………………………… 55,861,202 256,906,269 (2,694,551) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization………………………………………………………..… 32,673,191 15,173,285 3,267,252 Impairment of natural gas and oil properties…………………………………………..…………… 11,074,778 1,234,111 192,109 Exploration expenditures………………………….……………………………………..………… 19,038,463 4,747,798 5,473,218 Deferred income taxes…………………………………………………………..…..……………… (1,225,537) 115,952,055 692,818 Loss (gain) on sale of assets…………………………………………………………..…………… - (326,337,749) 2,313,334 Stock-based compensation………………….…………………………………………………….. 1,381,797 1,476,988 1,492,765 Tax benefit from exercise of stock options………………………………………………………… (264,187) (1,080,562) (188,897) Changes in operating assets and liabilities: Decrease (increase) in accounts receivable and other…………………………………………… 39,688,876 (67,279,024) (7,599,816) Increase in notes receivable……………………………………………………………………… - (250,000) (1,005,000) Increase in prepaid insurance………………………………………………..…………………… (19,366) (447,202) (205,904) Increase in inventory…………………………………………………………………………… - - (139,972) Increase (decrease) in accounts payable and advances from joint owners……………………… (11,597,588) 26,152,482 4,570,213 Increase (decrease) in other accrued liabilities……………………………..…………………… (43,819,351) 75,997,351 (87,286) Increase (decrease) in income taxes payable…………………………………………………… (7,420,632) 7,210,622 (2,377,988) Other………………………………………………………...…………………...……………… - 3,286,631 370,723 Net cash provided by operating activities………………………………………………..…… 95,371,646 112,743,055 4,073,018 CASH FLOWS FROM INVESTING ACTIVITIES: Natural gas and oil exploration and development expenditures…………….……………………… (45,741,659) (119,928,546) (77,688,085) Sale of short-term investments, net…………………………………………………………………… - 2,200,576 16,271,751 Additions to furniture and equipment………………………………………………………………. (16,025) (43,225) (26,659) Investment in Contango Venture Capital Corporation……………………………………………… - (1,166,624) (681,244) Acquisition of natural gas and oil producing properties…………………………………….……… - (309,000,000) - Sale/Acquisition costs………………………………………………………………………………… - (7,847,613) - Proceeds from the sale of assets……………..…………………………………………..…………… - 396,925,821 7,000,000 Net cash used in investing activities…………………………………………..…………………… (45,757,684) (38,859,611) (55,124,237) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under credit facility………………………………………………………………..…… - 35,000,000 25,000,000 Repayments under credit facility………………………………………………………………..…… (15,000,000) (40,000,000) (15,000,000) Borrowings (repayments) by affiliates……………………………………………………………… - (8,540,091) 8,540,091 Proceeds from preferred equity issuances, net of issuance costs…………………………………… - - 28,783,936 Preferred stock dividends……………………………………………………………………...……… - (1,547,777) (539,722) Repurchase/cancellation of stock options…………………………………………………………… - (5,922,532) (202,521) Purchase of common stock…………………………………………………………………………… (51,795,744) (663,900) - Proceeds from exercised options……………………………………………………………………… 1,654,345 580,760 519,715 Tax benefit from exercise/cancellation of stock options……………………………………………… 264,187 1,080,562 188,897 Debt issuance costs…………………………………………………………………………..……… (250,000) (163,510) (336,509) Net cash provided by (used in) financing activities…………………………………...…………… (65,127,212) (20,176,488) 46,953,887 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS…………………………… (15,513,250) 53,706,956 (4,097,332) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD…………………………………… 59,884,574 6,177,618 10,274,950 CASH AND CASH EQUIVALENTS, END OF PERIOD…………………………………………… $ 44,371,324 $ 59,884,574 $ 6,177,618 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for taxes, net of cash received…………………………………………………………… $ 45,592,652 $ 21,974,825 $ 451,993 Cash paid for interest………………………………………………………………………………… $ 397,579 $ 4,305,336 $ 2,702,672 The accompanying notes are an integral part of these consolidated financial statements.
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY Accumulated Other Preferred Stock Common Stock Paid-in Comprehensive Treasury Retained Shareholders' Comprehensive Shares Amount Shares Amount Capital Income Stock Earnings Equity Income Balance at June 30, 2006………….……… ………………………… 2,000 $ 80 14,999,085 $ 702,961 $ 45,105,504 $ - $ (6,180,000) $ 22,911,047 $ 62,539,592 Total Exercise of stock options…………………………………………… - - 106,500 4,260 515,455 - - - 519,715 Tax benefit from exercise of stock options………………………… - - - - 155,003 - - - 155,003 Cancellation of stock options, net of tax benefit of $33,894 ……… - - - - (168,627) - - - (168,627) Cashless exercise of stock options………………………………… - - 726 29 (29) - - - - Amortization of restricted stock…………………………………… - - 25,166 1,007 152,972 - - - 153,979 Conversion of Series D preferred stock to common stock………………………………………………… (2,000) (80) 833,330 33,334 (33,254) - - - - Issuance of Series E preferred stock………………………………… 6,000 240 - - 28,783,696 - - - 28,783,936 Expense of stock options …………………………………………… - - - - 1,338,786 - - - 1,338,786 Net loss…………………………………….………………………… - - - - - - - (2,694,551) (2,694,551) (2,694,551) Preferred stock dividends…………….……………………………… - - - - - - - (539,722) (539,722) Unrealized gain on available for sale securities, net of tax………… - - - - - 715,659 - - 715,659 715,659 Comprehensive income……………………………………………… - - - - - - - - - $ (1,978,892) Balance at June 30, 2007………….……… ………………………… 6,000 $ 240 15,964,807 $ 741,591 $ 75,849,506 $ 715,659 $ (6,180,000) $ 19,676,774 $ 90,803,770 Exercise of stock options…………………………………………… - - 71,000 2,840 577,920 - - - 580,760 Tax benefit from exercise of stock options………………………… - - - - 611,726 - - - 611,726 Cancellation of stock options, net of tax benefit of $468,836 ……… - - - - (5,453,696) - - - (5,453,696) Treasury shares at cost……………………………………………… - - (10,000) - - - (663,900) - (663,900) Amortization of restricted stock…………………………………… - - 4,471 179 252,257 - - - 252,436 Conversion of Series E preferred stock to common stock………………………………………………… (6,000) (240) 789,468 31,579 (31,339) - - - - Expense of stock options …………………………………………… - - - - 1,224,552 - - - 1,224,552 Net income…………………………………….…………………… - - - - - - - 256,906,269 256,906,269 256,906,269 Preferred stock dividends…………….……………………………… - - - - - - - (1,547,777) (1,547,777) Unrealized gain on available for sale securities, net of tax………… - - - - - (715,659) - - (715,659) (715,659) Comprehensive income……………………………………………… - - - - - - - - - $ 254,211,718 Balance at June 30, 2008………….……… ………………………… - $ - 16,819,746 $ 776,189 $ 73,030,926 $ - $ (6,843,900) $ 275,035,266 $ 341,998,481 Exercise of stock options…………………………………………… - - 230,500 9,220 1,645,125 - - - 1,654,345 Tax benefit from exercise of stock options………………………… - - - - 264,187 - - - 264,187 Amortization of restricted stock…………………………………… - - 3,088 124 240,457 - - - 240,581 Treasury shares at cost……………………………………………… - - (1,224,354) - - - (51,795,744) - (51,795,744) Expense of stock options …………………………………………… - - - - 1,141,216 - - - 1,141,216 Net income…………………………………….…………………… - - - - - - - 55,861,202 55,861,202 Balance at June 30, 2009………….……… ………………………… - $ - 15,828,980 $ 785,533 $ 76,321,911 $ - $ (58,639,644) $ 330,896,468 $ 349,364,268 The accompanying notes are an integral part of this consolidated financial statement. F-7
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UNITED STATES SECURITIES AND EXCHAN
Page 3 and 4:
CONTANGO OIL & GAS COMPANY AND SUBS
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• Uncertainties in the estimation
Page 8 and 9: Structuring incentives to drive beh
Page 10 and 11: Contango Resources Company and Cont
Page 12 and 13: Leases. The following table sets fo
Page 14 and 15: Competition The Company competes wi
Page 16 and 17: Jay D. Brehmer ....................
Page 18 and 19: Code of Ethics We adopted a Code of
Page 20 and 21: difficulty and delays in consistent
Page 22 and 23: Exploration is a high risk activity
Page 24 and 25: Competition in the natural gas and
Page 26 and 27: Pursuant to these provisions, the C
Page 28 and 29: Drilling Activity The following tab
Page 30 and 31: At June 30, 2009 Pre-tax net presen
Page 32 and 33: The following graph compares the ye
Page 34 and 35: Item 7. Management’s Discussion a
Page 36 and 37: Natural Gas, Oil and NGL Production
Page 38 and 39: For the year ended June 30, 2008, w
Page 40 and 41: Standardized Measure of Fiscal Year
Page 42 and 43: considerably from actual results. T
Page 44 and 45: EITF 03-6-1 are effective for finan
Page 46 and 47: REPORT OF INDEPENDENT REGISTERED PU
Page 48 and 49: Item 11. Executive Compensation The
Page 50 and 51: 10.25 Partial Assignment of Oil and
Page 52 and 53: SIGNATURES In accordance with Secti
Page 54 and 55: REPORT OF INDEPENDENT REGISTERED PU
Page 56 and 57: CONTANGO OIL & GAS COMPANY AND SUBS
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FORM 10-K CONTANGO OIL & GAS COMPANY

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